On the lower arbitrage bound of American contingent claims

Beatrice Acciaio and Gregor Svindland

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We prove that in a discrete-time market model the lower arbitrage bound of an American contingent claim is itself an arbitrage-free price if and only if it corresponds to the price of the claim optimally exercised under some equivalent martingale measure.

Keywords: American contingent claim; arbitrage-free price; Snell envelope (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2014-01
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Published in Mathematical Finance, January, 2014, 24(1), pp. 147-155. ISSN: 0960-1627

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